North American Agriculture: A Perspective As Indicated By U.S. Farm Financial Results

Transcription

1 North American Agriculture: A Perspective As Indicated By U.S. Farm Financial Results CAES Annual Meeting June 17-19, 212 Michael Harris Farm and Rural Business Branch USDA-Economic Research Service The views expressed here are the author s and should not be attributed to ERS or USDA.

2 Objectives Provide an overview of U.S. farm financial performance based on ERS sector accounts and farm operator responses to the Agricultural Resource Management Survey (ARMS) Look at the magnitude and distribution of U.S. farm business debt Examine trends in U.S. farm business debt

3 Sector versus farm business reporting ERS measures two types of accounts sector and farm business Sector accounts include farm operators, landlords and contractors, and other individuals. At the farm business level, ARMS farm level survey data are used. Only farm business operators are included.

4 U.S. net farm income $billion f Note: 212 forecast Source: USDA, Economic Research Service

5 Sector asset values $ billion continue to rise Total assets Real estate assets f Note: 212 forecast Source: USDA, Economic Research Service

6 Sector debt ratios continue to fall Percent Debt/asset ratio Debt/equity 5 Note: 212 forecast Source: USDA, Economic Research Service

7 Farm sector debt and maximum repayment capacity, 2-212f $billion Maximum feasible debt Farm business debt f Note: 212 forecast Source: USDA, Economic Research Service

8 $ billion Farm Sector Equity (net worth) continues to grow Source: USDA-ERS farm sector accounts

9 Farm businesses represent almost 882, farms and account for 94 percent of production 9% 8% 7% 6% 1,311,117 Farms Production Assets Debt 5% 4% 3% 617,876 2% 1% % 263,781 Rural Residence Intermediate Commercial Small farms whose operators report they are retired or they had a major occupation other than farming. Small farms with sales less than $25, whose operators report farming as their major occupation. Farms with sales greater than $25, and farms organized as nonfamily corporations or cooperatives. Farm Businesses

10 Total U.S. farm business debt has been mostly driven by large increases in $ billion 18 real estate debt Long-term debt Short-term debt Source: USDA Agricultural Resource Management Survey, ERS and NASS

11 Total U.S. farm business asset values continue to increase along $ billion with rising land values Non-real estate Real estate Source: USDA, Agricultural Resource Management Survey, ERS and NASS

12 $ thousand Average U.S. farm business debt increased only slightly in Long-term debt Short-term debt Source: Agricultural Management and Resource Survey, ERS and NASS

13 Percent The U.S. farm business debt-toasset ratio remained low in 21 6 Debt/asset ratio Source: USDA, Agricultural Resource Management Survey, ERS and NASS

14 U.S. farm business capital expenditures, 21-1 $ thousand Average capital expenditures Source: USDA, Agricultural Resource Management Survey, ERS and NASS

15 The number of U.S. farm businesses Percent with debt has been declining Source: USDA, Agricultural Resource Management Service, ERS and NASS

16 U.S farm business debt varies by farm Percent of farms size, 21 Less than $1k $1k-$1k $1k-$25k $25k-$5k $5k + Source: USDA, Agricultural Resource Management Survey, ERS and NASS

17 Most no-debt farms are non-commercial and small commercial farms*, 21 1% 9% 8% 7% 6% 5% 4% 3% 2% 1% % Less than $1k $1k-$1k $1k-$25k$25k-$5k More than $5k No debt Debt *Non-commercial and small commercial farms are predominately retirement and lifestyle farms. Source: USDA, Agricultural Resource Management Survey, ERS and NASS

18 Percent of farms Grain and oilseed farms lead the distribution of U.S. farm business Grain and oilseeds types with debt, 21 Beef cattle Hogs Dairy Other crops Other livestock Source: USDA, Agricultural Resource Management Survey, ERS and NASS

19 Distribution of U.S. farm businesses by leverage group, 25, 28 and 21 1% 9% 8% 7% 6% 5% 4% 3% 2% 1% % D/A = debt-to-asset ratio Source: USDA, Agricultural Resource Management Survey D/A>.7.4=<D/A<=.7 <D/A<.4 No debt

20 Larger farms are more leveraged, 21 1% 9% 8% 7% 6% 5% 4% 3% 2% 1% % D/A>.7.4<=D/A<=.7 D/A<.4 No debt D/A = debt-to-asset ratio Source: USDA, Agricultural Resource Management Survey, ERS and NASS

21 Dairy farms were more leveraged 1% 9% 8% 7% 6% 5% 4% 3% 2% 1% % than other farm types in 21 Grain and oilseed Beef cattle Hogs Dairy D/A = debt-to-asset ratio Source: USDA, Agricultural Resource Management Survey, ERS and NASS D/A>.7.4<=D/A<=.7 D/A<.4 No debt

22 Large grain and oilseed plus dairy farm business debt increased significantly Farm type between 21 and 21 Size (Sales) 21 debt ($billion) 21 debt ($billion) % change Grain & oilseeds Less than $5k $27.6 $ $5k and more $8.4 $ Beef cattle Less than $5k $25.4 $ $5k or more $6.4 $6.4 Hogs Less than $5k $.9 $.6-3 $5k or more $3.3 $5.3 6 Dairy Less than $5k $6.5 $ $5k or more $6.9 $ Source: USDA, Agricultural Resource Management Survey, ERS and NASS

23 Comparing U.S. farm businesses with debt to debt-free farms, 25, 28 and 21 Variable 25 percent difference 28 percent difference 21 percent difference Age of operator -15% -14% -1% Revenues 254% 273% 22% Expenses 255% 397% 345% Net farm income 123% 347% 224% Off-farm income % 23% Government payments 175% 211% 31% Capital expenditures 271% 411% 376% Acres operated 85% 13% 144% Rented land 231% 261% 342% Land and building value -27% -53% 2%* Machinery and equipment value 137% 29% 195% Livestock assets value 138% 35% 214% * Not significant Source: Agricultural Resource Management Survey, ERS and NASS

24 Comparing highly leveraged to lower leveraged U.S. grain and oilseed farms, 25, 28 and 21 Variable 25 percent difference 28 percent difference 21 percent difference Age of operator -16%* -23%* -24%* Revenues 18% -21% -29%* Expenses 42%* -12% -11% Net operating income -37% -57% -8%* Off-farm income -- 17% 7% Government payments 24% 3%* -37%* Capital expenditures -15% 6% 62%* Acres operated 4%* -5%* 11% Rented land 88%* -27% 67% Land and building value -76%* -68%* -83%* Machinery and equipment value -19%* -35%* -57%* *Significant difference Note: highly leveraged farms have D/A ratios of.7 or greater. Lower leveraged are.4 or less. Source: Agricultural Resource Management Survey, ERS and NASS

25 Comparing lower leveraged with higher leveraged U.S. dairy farm businesses, 25, 28 and 21 Variable 25 percent difference 28 percent difference 21 percent difference Age of operator -22%* -2% -2%* Capital expenditures 32%* 77% 24%* Acres operated -28%* 12% 13%* Machinery and equipment value -3% 19% 71%* Note: Highly leveraged farms have D/A ratios of.7 or higher. Lower leveraged farms have D/A ratios of.4 or less. *Significant difference Source: Agricultural Resource Management Survey, ERS and NASS

26 Most U.S. farm businesses remain in a favorable financial status in 25, Percent of farms and Favorable Marginal income Marginal solvency Vulnerable Note: Favorable=D/A ratio <=.4 and net farm income >; marginal income=d/a ratio <=.4 and net farm income<; marginal solvency= D/A ratio >.4 and net farm income >; vulnerable=d/a ratio >.4 and net farm income < Source: USDA, Agricultural Resource Management Survey, ERS and NASS

27 Concluding remarks Increases in real estate debt have been the principal driver of increasing U.S. farm business debt Debt-to-asset and debt-to-equity ratios remain lower than earlier in the decade About two-thirds of U.S. farm businesses have no term debt Overall, both the farm sector and ARMS farmlevel survey data indicate that U.S. farm business financial performance and viability are favorable.